Good day! The markets took a stumble on Tuesday, following a push for 12k in the Dow Jones Industrial Average the day before. As examined in the morning commentary, however, the trend on the upside became exhausted after a series of three waves of buying with comparable correction periods and then a fourth move after a slightly longer correction. Typically the trend will then break and need a much more substantial corrective period if it is to continue.

The futures had begun trend lower into the closing bell on Monday, but a premarket base at lows got a little bit of a boost from the 8:30 am ET producer price index. While the overall PPI reflected a strong decline, the core PPI rose an unexpected 0.6%. This is the highest rate since January of 2005 and was aided substantially by rising motor vehicle prices. The core PPI excludes food and energy, where the largest decline took place, and increases concerns on rising inflation.

Earnings season also played a slight roll in the lower market open. Intel Corp. (INTC) experienced a strong decline after being downgraded ahead of their third-quarter earnings which were due out following the close. (Incidentally, the Q3 results are an operating income of $1.4 billion and an EPS of $0.22.) EMC also experienced strong selling early on, despite nice earnings, but it made a comeback later on. On the other hand, a number of other stocks bucked the trend on earnings, such as JNJ, which beat by $0.04. KEY, MAN, and OPD also opened higher following strong results.

Given the trend placement and the resistance overhead into the open, the market was unable to mount any immediate recovery early on in the session. The S&P 500 had its 5 minute 200 simple moving average directly overhead and all three indices were up again price resistance from the prior several days of trading. The downside continued immediately. Even though the sellers backed off a bit after about 20 minutes, they took over once more out of the 11:00 ET reversal period. The Nasdaq Composite had continued its downtrend early into 10:30 ET, so the 11:00 ET move in that index was not as extreme as in the S&Ps and Dow, but while those two hit equal move resistance into noon as compared to the initial decline, the Nasdaq by that time had experienced three waves of selling. Each was slower than the last, creating rounded lows that aided in a strong reversal off lows when that sturdier 12:00 ET reversal period hit.

The market turned over very nicely intraday with the aid of the 15 minute 200 sma and 10 day sma support levels when that 12:00 ET reversal period and trend support hit. The pace picked up and it took only about half the time to take back the losses of the last 5 minute decline as it did to break down in the first place. The indices then based along resistance until breaking out early at 13:00 ET. The congestion along the resistance was not long enough to deal with the prior rally, so it took a pullback into the range and the 5 minute 20 sma before the market was able to move higher again. This expanded into a 15 minute base at the 15 minute 20 sma resistance and repeated itself on that time frame before the pace increased again into 15:00 ET.  This rally took the Nasdaq back to its opening highs and nearly closed the gap in the Dow before backing off with the 15:30 ET reversal period to end the day.

Tuesday's final results showed a loss of 30.58 points in the Dow Jones Industrial Average ($DJI), 18.89 points in the Nasdaq Composite ($COMPX), and 5.00 points in the S&P 500 ($SPX). Since the indices sold off sharply in the morning and were then able to pull higher throughout the afternoon, it is suggesting that the market is trying to fall into another range on the 60 minute charts. As such, Wednesday has higher odds for a trading range on the larger intraday time frames of the Dow and S&P 500. The Nasdaq's relative weakness will make it the most susceptible to a break of Tuesday's lows on intraday selling.

Economic Reports and Events
Oct. 18: Building Permits, Core CPI, CPI, and Housing Starts for Sept. (8:30 am), Crude Inventories 10/13 (10:30 am)
Oct. 19: Initial Claims 10/14 (8:30 am), Leading Indicators for Sept. (10:00 am), Philadelphia Fed for Oct. (12:00 pm)
Oct. 20: -
Oct. 23: -
Oct. 24: -
Oct. 25: Existing Home Sales for Sept. (10:00 am), Crude Inventories 10/20 (10:30 am), FOMC policy statement (2:15 pm)
Oct. 26: Durable Orders for Sept. (8:30 am), Initial Claims 10/21 (8:30 am), Help-Wanted Index for Sept. (10:00 am), New Home Sales for Sept. (10:00 am)
Oct. 27: Chain Deflator-Adv. for Q3 (8:30 am), GDP-Adv. for Q3 (8:30 am), Michigan Sentiment-Rev for Oct. (9:50 am)

Earnings Announcements of Interest
Only stocks with an average daily volume of 500K+ are listed. List may not be complete so be sure to always check your stock's earnings date before holding a position overnight.
Oct. 18: ABT, ADS, AMLN, AAPL, ASML, BSX, COF, CDWC, CIT, CTXS, CNB, CBSS, CBST, ET, EBAY, GD, GPC, ITW, RX, ISIL, JPM, JNPR, KEA, LHO, MEL, MOGN, MGI, NTRS, NCX, JNC, NVEC, OXY, PH, PLCM, RDN, RJF, RYL, SEIC, SSTI, SON, SPSN, STJ, SNV, TCB, TER, ALL, WM
Oct. 19: AVCT, BAC, BAX, BBT, BHE, BGG, BRCM, CNI, CERN, CHKP, C, CMA, CAL, CREE, C, DHR, DJ, ELNK, LLY, ENDP, EFX, EXAR, FCS, FITB, FSL, GOOG, HON, HBAN, HYSL, INFA, LRW, LSTR, LEG, MCD, MOLX, NE, NOK, NVS, NUE, OXPS, BTU, PMCS, POOL, DGX, RMBS, RBAK, RS, RHI, ROH, SNDK, SAP, SHW, SIRF, SLM, LUV, SPWR, SY, SYNA, ERIC, TPX, TXT, BK, KO, HSY, MHP, NDAQ, NYT, TRB, UNP, UB, UNH, VRSN, WCC, WSTL, WYE, XLNX, ZION
Oct. 20: MMM, ACI, CAT, ECL, MRK, NETC, SAY, SGP, SLB, VMSI
Oct. 23: AXP, AMGN, ABFS, T, ATHR, BRO, BUCY, CNET, DST, ETH, FDC, FM, FDG, GRP, HAL, HAS, N, KMB, KFT, LNCR, FLSH, NFLX, PTV, PRE, PBI, PCL, ROK, SLAB, SWN, TXN, VECO, WFT, WU, XRX
Note: All economic numbers and earnings reports are in lines with those compiled by Yahoo Finance. Occasionally changes will occur that are made after the posting of this column.

Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.